Author Archives: henrykotula

COVID-19 pushes Mayo Clinic’s operating income into free fall

Posted on by • Posted in Cash, Cash Reserves, Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Employee Furlough, Employee Hiring Freeze, Employee Layoffs, Employee Pay Cuts, Employee Protections, Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Outlook, Market Power, Market Share, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Pandemic • Leave a comment

https://www.healthcaredive.com/news/covid-19-pushes-mayo-clinics-operating-income-into-free-fall/578191/

Farrugia calls 2019 'a year of remarkable growth' as Mayo reports ...

Dive Brief:

  • Prior to the onset of the novel coronavirus, Mayo Clinic was cruising along with a healthy operating margin of 6.7% during the first two months of the quarter. But by the close of the period, the operating margin was squeezed to just 0.9% while net operating income fell off a cliff, free falling 88% to $29 million compared to the first quarter of 2019.
  • Due to contracting services and the near closure of its outpatient business in response to the pandemic, revenues for the quarter declined nearly 4% while expenses rose 3% compared to the prior-year period.
  • The fluctuation in the financial markets caused a downturn in Mayo’s investment portfolio, leading to an overall net loss of $623 million for the Rochester, Minnesota-based nonprofit health system.

Dive Insight:

Mayo Clinic is the latest hospital operator to report it first quarter results have been battered by the pandemic.

The system, which took in more than $1 billion in operating income in 2019, joins other major hospital operators that reported a dip in volumes amid the public health crisis, including HCA and CommonSpirit.

The second quarter is not likely to look better, according to Fitch Ratings. The second quarter looks bleak as the ratings agency issued an ominous report predicting it would be the “worst on record” for most nonprofit hospitals.

Yet, some of the for-profit hospital operators see May as the beginning of the recovery. Both Tenet and CHS executives seemed upbeat about the prospects for this month, noting it was the start of resuming elective procedures that had been put off.

Despite the hospital sector as a whole taking a major hit from the pandemic, big wealthy systems like Mayo have significant rainy day funds. Mayo reported cash and investments of more than $10.6 billion as of March 30 with 252 days cash on hand.

In April, Mayo issued a voluntary notice about how the virus was taking on its business, noting reduced salaries for executives and physicians, furloughs and a hiring freeze, among other efforts.​

In its first quarter report, Mayo detailed the ways in which it’s tackling the novel coronavirus on the medical front, including leading a program, approved by the FDA, that gives severely sick COVID-19 patients plasma from those who were previously sickened but have since recovered from the virus.

Mayo said it’s preparing the program’s first safety report on the first 5,000 patients to receive the infusion. As of May 12, more than 9,300 patients have been infused, Mayo said.

The system also runs COVID-19 testing, and said it is now able to administer 8,500 molecular tests and 20,000 serologic tests, which look for antibodies to the virus in those that may have been previously infected, daily.

 

 

CommonSpirit posts $1.4B loss, says full COVID-19 impact unknown

Posted on by • Posted in Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Elective Procedures, Elective Surgery, Employee Furlough, Employee Hiring Freeze, Employee Layoffs, Employee Pay Cuts, Employee Protections, Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Share, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Pandemic, Paycheck Protection Program, The CARES Act, Uncertainty • Leave a comment

https://www.healthcaredive.com/news/commonspirit-posts-14b-loss-too-soon-to-project-long-term-covid-19-impac/578100/

Locations | CommonSpirit Health

Dive Brief:

  • CommonSpirit Health, sprung from last year’s merger of California-based Dignity Health and Colorado-based Catholic Health Initiatives, reported a loss topping $1.4 billion in the fiscal third quarter ending March 31, although adjusted revenues were flat compared to the third quarter of 2019. The biggest proportion of losses were tied to investments, as its portfolio dropped in value by nearly $1.1 billion. Its total net assets are down nearly $2.5 billion from a year ago.
  • Like many other hospital systems, CommonSpirit reported a drop in patient volumes that began in mid-March as states began issuing lockdown orders. Acute admissions dropped more than 5% for the quarter compared to a year ago.
  • CommonSpirit did receive more than $700 million in Coronavirus Aid, Relief, and Economic Security Act funds, although since it was received on March 31 it will be booked into its fiscal fourth quarter financial statements. The system received another $2.6 billion in accelerated payments from CMS and anticipates receiving another $410 million in disaster relief funding and from the Paycheck Protection Program.​

Dive Insight:

The COVID-19 pandemic is continuing to ravage the bottom lines of providers, and the nation’s largest not-for-profit hospital system, CommonSpirit Health, is no exception.

Its first full year as a unified system is 2020, and the COVID-19 pandemic is challenging the 134-hospital organization in ways it likely never anticipated. Admissions are down for the foreseeable future, coupled with the need to spend tens of millions of dollars on personal protective equipment, respirators and to divert a significant amount of resources toward treating coronavirus patients.

Fitch Ratings said COVID-19 is to blame for the worst second quarter for most U.S. hospitals and systems.

For the third quarter of 2020, CommonSpirit reported an operating loss of $145 million, compared to a pro forma $124 million loss reported by Dignity and CHI for the first quarter of 2019.

CommonSpirit posted a net loss of $1.4 billion for the third quarter, compared to a pro forma net gain of $9.7 billion for the third quarter of 2019. However, $9.2 billion of that came from what CommonSpirit termed a “contribution from business combination,” the net assets received from both parties by merging with one another. For the first nine months of fiscal 2020, CommonSpirit lost $1.1 billion on revenue of $22.4 billion, compared to a net gain of $9.5 billion on revenue of $21.6 billion over the same period in fiscal 2019.

And despite receiving some $3.7 billion in federal assistance, CommonSpirit said in its quarterly financial disclosures that it remains too soon to tell what the impact of COVID-19 will be on the organization over the long-term.

Prior to the pandemic, CommonSpirit’s financial position was trending stronger compared to its pre-merger state. Seven of its 14 operating divisions reported a jump in revenue during the quarter compared to 2019.

 

 

 

 

COVID-19 shreds Sutter Health’s finances in matter of weeks

Posted on by • Posted in Cash, Cash Reserves, Coronavirus, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Employee Furlough, Employee Hiring Freeze, Employee Layoffs, Employee Pay Cuts, Employee Protections, Health Policy, Health System, Hospital, Hospital Industry, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Pandemic • Leave a comment

https://www.healthcaredive.com/news/covid-19-shreds-sutter-healths-finances-in-matter-of-weeks/578021/

Dive Brief:

  • Sutter Health, one of California’s largest and most powerful hospital networks, is getting pounded by losses related to the COVID-19 outbreak, according to a report issued to bondholders.
  • Sutter posted an operating loss of $236 million for the first quarter ending March 31, and a net loss of almost $1.1 billion. That’s even though California officials did not begin locking down activities in the state until the second part of March. Sutter saw an operating loss of $360 million in April alone, after the first quarter concluded, suggesting net losses for the second quarter could be even larger.
  • Much of the losses are attributed to the abrupt cutoff of patient flow to Sutter hospitals, clinics and medical offices. Only 5.7% of its intensive care unit beds are being used to treat COVID-19 patients, Sutter reported, and almost 32% of its ICU beds were unused as of May 11.

Dive Insight:

For decades, Sacramento-based Sutter Health has been considered the most powerful hospital operator in Northern California, with facilities throughout the Bay Area and even the more rural part of the state north of San Francisco. Critics allege its market dominance contributes to the long-term cost imbalance for hospital services between the northern and southern parts of the state.

Like many other chains and hospitals, it took only a few weeks of the COVID-19 outbreak and California’s statewide stay-at-home order to hamstring Sutter’s operations. Between March 17 and the end of April, inpatient bed days at Sutter hospitals declined by 23%, its ambulatory facilities have experienced volume declines of 73%, and emergency room visits were down 43%.

In the Wednesday note to bondholders, Sutter reported unaudited losses of $1.1 billion on revenue of $3.2 billion for the first quarter. It netted $394 million on revenue of $3.3 billion in the same period last year.

Sutter joins other large hospital networks such as the Mayo Clinic and Kaiser Permanente in reporting recent revenue losses related to COVID-19.

Yet the numbers for Sutter could get grimmer over the second quarter as revenue continues to sink. For April, it projects operating losses of $360 million and a negative operating margin of 50.5%, not counting congressional relief funds.

“Sutter anticipates in the near term at least a $300 million per month reduction in operating performance until containment of COVID-19,” it reported. It is also spending tens of millions of dollars to purchase equipment to confront a potential resurgence of COVID-19 this fall and winter — on top of some $57 million it has already spent to prepare for the pandemic.

As a result, Sutter says it has either cut the hours of about 5,000 of its employees, reassigned them or sent them for retraining.

While Sutter noted that California is slowly reopening the state after six weeks of shutdown, it remains to be seen whether patient flow will return to normal. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, warned this week that reopening too soon could lead to a spike in new coronavirus cases.

The funds Sutter has received from the Coronavirus Aid, Relief, and Economic Security Act have alleviated the financial pain to some extent. It has received $205 million to date, plus another $1 billion in accelerated Medicare claims payments from CMS. Factoring that in, Sutter says April operating losses would be cut to $168 million.

Sutter is also sitting on about $6 billion in cash and liquid investments, but notes it has lost $500 million from its portfolio since the start of the year. It has also borrowed $400 million from a $500 million credit line so far this year and obtained another $100 million credit line last month.

 

 

 

 

For-profit, higher-margin hospitals at advantage when it comes to CARES funding

Posted on by • Posted in Coronavirus, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, For-Profit, Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Share, The CARES Act • Leave a comment

https://www.healthcaredive.com/news/for-profit-higher-margin-hospitals-at-advantage-when-it-comes-to-cares-fun/577941/

Understanding the CARES Act student loan relief | Sanford Center ...

Dive Brief:

  • Hospitals that tend to have a higher mix of private payer revenue are likely to receive more novel coronavirus federal grant money compared to hospitals that rely on government payers such as Medicare and Medicaid, a new analysis from the Kaiser Family Foundation found.
  • The study aims to analyze the implications of tying the latest round of $50 billion in federal bailout money to providers’ net patient service revenue. It examined hospital financial data and used the HHS’ grant formula to determine the amount of grant money hospitals were likely to receive.
  • KFF found that hospitals with the highest share of private insurance revenue, or those in the top 10%, received $44,321 per hospital bed, or more than double the hospitals in the bottom 10%.

Dive Insight:

This latest analysis reveals some hospitals may be at a disadvantage when it comes to receiving federal funding that is meant to serve as a lifeline for them during the COVID-19 pandemic.

The study found that hospitals with the highest share of private insurance revenue — and those set to receive more in bailout money — were less likely to be teaching hospitals and more likely to be for-profit. Also, they were more likely to have higher operating margins and provided less uncompensated care as a share of operating expenses.

In short, KFF explains that the funding package is skewed toward hospitals with higher revenue from private payers.

“These hospitals’ large share of private reimbursement may be due either to having more patients with private insurance or charging relatively high rates to private insurers or a combination of those two factors. All things being equal, hospitals with more market power can command higher reimbursement rates from private insurers and therefore received a larger share of the grant funds under the formula HHS used,” according to the analysis.

The study points out that a community health center that sees a small portion of patients with private pay would receive less funding than a private physician office that sees the same total number of patients but treats more with private pay.

“With HHS expected to release additional relief fund grants and Congress considering additional stimulus, this analysis demonstrates that the formula used to distribute funding has significant consequences for how funding is allocated among providers,” according to KFF.

Hospitals have been battered by the outbreak of the novel coronavirus. They’ve halted elective procedures and routine care in an effort to preserve needed medical supplies and in an attempt to snuff out the spreading virus.

That has caused hospital volumes and revenues to plummet as care is deferred, so the federal government has sent financial aid in response as part of the Coronavirus Aid, Relief, and Economic Security Act.

This latest round of funding was designed to be a more targeted approach than the initial wave. The first $30 billion released was distributed based on a facility’s share of Medicare fee-for-service. That put facilities with a small slice of Medicare fee-for service business, such as children’s hospitals, at a disadvantage. However, the first round was one way to get money out the door quickly, which officials have acknowledged, knowing a more targeted approach would follow.

 

 

 

 

Fitch Q2 outlook for nonprofit hospitals: ‘worst on record’

Posted on by • Posted in 2020 Election Issues, Cash, Cash Reserves, Cash-Flow Improvements, Clinical Testing, Contact Tracing, Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Demand, Economic Crisis, Economic Stimulus, Elective Procedures, Elective Surgery, Employee Furlough, Employee Hiring Freeze, Employee Layoffs, Employee Pay Cuts, Employer-Based Health Insurance, Essential Workers, Financially Distressed, Health Insurance Coverage Adequacy, Health Policy, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Hospital, Hospital Industry, Infection Control Plan, Infectious Virus, Market Outlook, Mortality, National Strategy, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Out of Pocket Expenses, Pandemic, Preexisting Conditions, Public Health, Public Safety, Quarantine, Social Distancing, Surprise Bills, Uncertainty, Underinsured, Unemployment, Unemployment Insurance, Uninsured • Leave a comment

https://www.healthcaredive.com/news/fitch-analysts-hospital-worries-FY-2020/577875/

Nicklaus Children's Health System Receives A+ Rating from Fitch ...

From the Mayo Clinic to Kaiser Permanente, nonprofit hospitals are posting massive losses as the coronavirus pandemic upends their traditional way of doing business.

Fitch Ratings analysts predict a grimmer second quarter: “the worst on record for most,” Kevin Holloran, senior director for Fitch, said during a Tuesday webinar.​

Over the past month, Fitch has revised its nonprofit hospital sector outlook from stable to negative. It has yet to change its ratings outlook to negative, though the possibility wasn’t ruled out.

Some have already seen the effects. Mayo estimates up to $3 billion in revenue losses from the onset of the pandemic until late April — given the system is operating “well below” normal capacity. It also announced employee furloughs and pay cuts, as several other hospitals have done.

Data released Tuesday from health cost nonprofit FAIR Health show how steep declines have been for larger hospitals in particular. The report looked at process claims for private insurance plans submitted by more than 60 payers for both nonprofit and for-profit hospitals.

Facilities with more than 250 beds saw average per-facility revenues based on estimated in-network amounts decline from $4.5 million in the first quarter of 2019 to $4.2 million in the first quarter of 2020. The gap was less pronounced in hospitals with 101 to 250 beds and not evident at all in those with 100 beds or fewer.

Funding from federal relief packages has helped offset losses at those larger hospitals to some degree.

Analysts from the ratings agency said those grants could help fill in around 30% to 50% of lost revenues, but won’t solve the issue on their own.

They also warned another surge of COVID-19 cases could happen as hospitals attempt to recover from the steep losses they felt during the first half of the year.

Anthony Fauci, the nation’s top infectious disease expert, warned lawmakers this week that the U.S. doesn’t have the necessary testing and surveillance infrastructure in place to prep for a fall resurgence of the coronavirus, a second wave that’s “entirely conceivable and possible.”

“If some areas, cities, states or what have you, jump over these various checkpoints and prematurely open up … we will start to see little spikes that may turn into outbreaks,” he told a Senate panel.

That could again overwhelm the healthcare system and financially devastate some on the way to recovery.

“Another extended time period without elective procedures would be very difficult for the sector to absorb,” Holloran said, suggesting if another wave occurs, such procedures should be evaluated on a case-by-case basis, not a state-by-state basis.

Hospitals in certain states and markets are better positioned to return to somewhat normal volumes later this year, analysts said, such as those with high growth and other wealth or income indicators. College towns and state capitols will fare best, they said.

Early reports of patients rescheduling postponed elective procedures provide some hope for returning to normal volumes.

“Initial expectations in reopened states have been a bit more positive than expected due to pent up demand,” Holloran said. But he cautioned there’s still a “real, honest fear about returning to a hospital.”

Moody’s Investors Service said this week nonprofit hospitals should expect the see the financial effects of the pandemic into next year and assistance from the federal government is unlikely to fully compensate them.

How quickly facilities are able to ramp up elective procedures will depend on geography, access to rapid testing, supply chains and patient fears about returning to a hospital, among other factors, the ratings agency said.

“There is considerable uncertainty regarding the willingness of patients — especially older patients and those considered high risk — to return to the health system for elective services,” according to the report. “Testing could also play an important role in establishing trust that it is safe to seek medical care, especially for nonemergency and elective services, before a vaccine is widely available.”

Hospitals have avoided major cash flow difficulties thanks to financial aid from the federal government, but will begin to face those issues as they repay Medicare advances. And the overall U.S. economy will be a key factor for hospitals as well, as job losses weaken the payer mix and drive down patient volumes and increase bad debt, Moody’s said.

Like other businesses, hospitals will have to adapt new safety protocols that will further strain resources and slow productivity, according to the report.​

Another trend brought by the pandemic is a drop in ER volumes. Patients are still going to emergency rooms, FAIR Health data show, but most often for respiratory illnesses. Admissions for pelvic pain and head injuries, among others declined in March.

“Hospitals may also be losing revenue from a widespread decrease in the number of patients visiting emergency rooms for non-COVID-19 care,” according to the report. “Many patients who would have otherwise gone to the ER have stayed away, presumably out of fear of catching COVID-19.”

 

 

 

Vaccine experts say Moderna didn’t produce data critical to assessing Covid-19 vaccine

Posted on by • Posted in Antibodies, Biotech, Clinical Research, Clinical Trials, Coronavirus, Data, Expectations, National Institute for Allergy and Infectious Diseases (NIAID), Vaccination, Vaccine, Vaccine RNA • Leave a comment

Vaccine experts say Moderna didn’t produce data critical to assessing Covid-19 vaccine

Moderna taps $1.34B stock offering to bankroll its promising COVID ...

Heavy hearts soared Monday with news that Moderna’s Covid-19 vaccine candidate — the frontrunner in the American market — seemed to be generating an immune response in Phase 1 trial subjects. The company’s stock valuation also surged, hitting $29 billion, an astonishing feat for a company that currently sells zero products.

But was there good reason for so much enthusiasm? Several vaccine experts asked by STAT concluded that, based on the information made available by the Cambridge, Mass.-based company, there’s really no way to know how impressive — or not — the vaccine may be.

While Moderna blitzed the media, it revealed very little information — and most of what it did disclose were words, not data. That’s important: If you ask scientists to read a journal article, they will scour data tables, not corporate statements. With science, numbers speak much louder than words.

Even the figures the company did release don’t mean much on their own, because critical information — effectively the key to interpreting them — was withheld.

Experts suggest we ought to take the early readout with a big grain of salt. Here are a few reasons why.

The silence of the NIAID

The National Institute for Allergy and Infectious Diseases has partnered with Moderna on this vaccine. Scientists at NIAID made the vaccine’s construct, or prototype, and the agency is running the Phase 1 trial. This week’s Moderna readout came from the earliest of data from the NIAID-led Phase 1.

NIAID doesn’t hide its light under a bushel. The institute generally trumpets its findings, often offering director Anthony Fauci — who, fair enough, is pretty busy these days — or other senior personnel for interviews.

But NIAID did not put out a press release Monday and declined to provide comment on Moderna’s announcement.

The n = 8 thing

The company’s statement led with the fact that all 45 subjects (in this analysis) who received doses of 25 micrograms (two doses each), 100 micrograms (two doses each), or a 250 micrograms (one dose) developed binding antibodies.

Later, the statement indicated that eight volunteers — four each from the 25-microgram and 100-microgram arms — developed neutralizing antibodies. Of the two types, these are the ones you’d really want to see.

We don’t know results from the other 37 trial participants. This doesn’t mean that they didn’t develop neutralizing antibodies. Testing for neutralizing antibodies is more time-consuming than other antibody tests and must be done in a biosecurity level 3 laboratory. Moderna disclosed the findings from eight subjects because that’s all it had at that point. Still, it’s a reason for caution.

Separately, while the Phase 1 trial included healthy volunteers ages 18 to 55 years, the exact ages of these eight people are unknown. If, by chance, they mostly clustered around the younger end of the age spectrum, you might expect a better response to the vaccine than if they were mostly from the senior end of it. And given who is at highest risk from the SARS-CoV-2 coronavirus, protecting older adults is what Covid-19 vaccines need to do.

There’s no way to know how durable the response will be

The report of neutralizing antibodies in subjects who were vaccinated comes from blood drawn two weeks after they received their second dose of vaccine.

Two weeks.

“That’s very early. We don’t know if those antibodies are durable,” said Anna Durbin, a vaccine researcher at Johns Hopkins University.

There’s no real way to contextualize the findings

Moderna stated that the antibody levels seen were on a par with — or greater than, in the case of the 100-microgram dose — those seen in people who have recovered from Covid-19 infection.

But studies have shown antibody levels among people who have recovered from the illness vary enormously; the range that may be influenced by the severity of a person’s disease. John “Jack” Rose, a vaccine researcher from Yale University, pointed STAT to a study from China that showed that, among 175 recovered Covid-19 patients studied, 10 had no detectable neutralizing antibodies. Recovered patients at the other end of the spectrum had really high antibody levels.

So though the company said the antibody levels induced by vaccine were as good as those generated by infection, there’s no real way to know what that comparison means.

STAT asked Moderna for information on the antibody levels it used as a comparator. The response: That will be disclosed in an eventual journal article from NIAID, which is part of the National Institutes of Health.

“The convalescent sera levels are not being detailed in our data readout, but would be expected in a downstream full data exposition with NIH and its academic collaborators,” Colleen Hussey, the company’s senior manager for corporate communications, said in an email.

Durbin was struck by the wording of the company’s statement, pointing to this sentence: “The levels of neutralizing antibodies at day 43 were at or above levels generally seen in convalescent sera.”

“I thought: Generally? What does that mean?” Durbin said. Her question, for the time being, can’t be answered.

Rose said the company should disclose the information. “When a company like Moderna with such incredibly vast resources says they have generated SARS-2 neutralizing antibodies in a human trial, I would really like to see numbers from whatever assay they are using,” he said.

Moderna’s approach to disclosure

The company has not yet brought a vaccine to market, but it has a variety of vaccines for infectious diseases in its pipeline. It doesn’t publish on its work in scientific journals. What is known has been disclosed through press releases. That’s not enough to generate confidence within the scientific community.

“My guess is that their numbers are marginal or they would say more,” Rose said about the company’s SARS-2 vaccine, echoing a suspicion that others have about some of the company’s other work.

“I do think it’s a bit of a concern that they haven’t published the results of any of their ongoing trials that they mention in their press release. They have not published any of that,” Durbin noted.

Still, she characterized herself as “cautiously optimistic” based on what the company has said so far.

“I would like to see the data to make my own interpretation of the data. But I think it is at least encouraging that we’ve seen immune responses with this RNA vaccine that we haven’t seen with previous RNA vaccines for other pathogens. Whether it’s going to be enough, we don’t know,” Durbin said.

Moderna has been more forthcoming with data on at least one of its other vaccine candidates. In a statement issued in January about a Phase 1 trial for its cytomegalovirus (CMV) vaccine, it quantified how far over baseline measures antibody levels rose in vaccines.